**Domestic Investors Pour ₹5.3 Lakh Crore into Equities, Surpassing 2024 Record**

*By Mudit Dube | Sep 22, 2025, 01:49 PM*

Domestic institutional investors (DIIs) in India have set a new record in equity investments this year, surpassing the peak reached in 2024. So far in 2025, DIIs—including mutual funds, insurers, banks, and pension systems—have net bought equities worth ₹5.3 lakh crore. Remarkably, this figure has already exceeded last year’s total of ₹5.22 lakh crore, with a quarter of the year still to go.

### Mutual Funds Lead the Charge

Mutual funds have been the driving force behind this record inflow, contributing ₹3.65 lakh crore of the total. This surge is supported by robust monthly Systematic Investment Plan (SIP) flows exceeding ₹25,000 crore and high cash holdings of ₹1.98 lakh crore reported in August.

Insurance companies and pension funds have added over ₹1 lakh crore to the total investment pool. Portfolio Management Services (PMSs), Alternative Investment Funds (AIFs), banks, and others complete the remaining contribution.

### Indian Equities Lag Behind Globally

Despite strong domestic inflows, Indian equities have underperformed on the global stage. In dollar terms, the Sensex has gained just 2% and the Nifty 4% so far this year. This underperformance is largely attributed to weak corporate earnings and stretched market valuations.

The sustainability of mutual fund inflows is now under scrutiny. Equity fund inflows declined by 22% in August to ₹33,430 crore, down from the record high of ₹42,702 crore in July.

### Market Challenges Ahead

Analysts have raised concerns over rising redemptions from small-cap and thematic funds as investors book profits and redirect their money into real estate. Additionally, GST rationalization and increased festive spending may compress household savings, thereby limiting fresh equity allocations.

External risks are also weighing on investor sentiment. These include the US raising H-1B visa fees and revoking sanction waivers on Iran’s Chabahar Port, factors that add to the uncertainty in the market.

### Foreign Institutional Investors Continue to Exit

Foreign institutional investors (FIIs) have maintained their selling trend, offloading ₹1.8 lakh crore in equities so far in 2025, following ₹1.21 lakh crore worth of sales last year. Their shareholding in Indian equities has fallen sharply from 22% in 2019 to just 16% today.

This trend aligns with India’s 30-percentage-point underperformance against the MSCI Emerging Markets index—the steepest gap since 1996—further compounding the challenges faced by the Indian equity market.

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*Despite robust domestic buying, the Indian equity market faces hurdles due to underperformance internationally, weakening earnings, and external risks. The coming months will be critical in determining whether the strong inflows by DIIs can be sustained amidst these challenges.*
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